Government changes to savings system can help Canadians prepare for retirement

CALGARY, Feb. 26, 2013 /CNW/ - Since the 2008-2009 economic crisis,
Canadians have had a harder time accumulating wealth for retirement
purposes. Governments have also been feeling the pinch and are not in
position to increase spending on retirement benefits. But, according to
a report released today by The School of Public Policy, there are still
several measures government can take to help Canadians save for
retirement.

Report authors Jack Mintz and Thomas Wilson argue that a series of
policy reforms would lend savers a hand without cutting into government
revenue in the long run.

"The reforms need not be far-reaching to have a meaningful impact," the
authors write. "And they need not be costly, either."

The policy reforms that Mintz and Wilson propose include the following:

Expansion of the Canada Pension Plan (CPP) to allow larger contributions
— shared by employers and employees, or covered entirely by employees —
that would, in turn, allow retiring workers to draw a larger maximum
pension, rather than having to rely on the guaranteed income supplement
(GIS).

CPP contributions could be made deductible from taxable income, like
RRSP investments, to encourage workers to maximize contributions.

To minimize an increase in payroll taxes, the eligibility age for CPP
benefits could be increased to 67 years of age, similar to old-age
security eligibility.

Tax treatment of group RRSPs — for which employer contributions are
currently subject to payroll taxes — should be made the same as it is
for defined-contribution registered pension plans (RPPs).

Increased age limit for RPP and RRSP contributions, from 71 to 75 years,
to reflect the increase in life expectancies.

RRSP contributions can be altered to allow lifetime averaging, allowing
workers to take advantage of additional contribution room.

Increased contribution limits on Tax-Free Savings Accounts

Creation of a capital-gains deferral account to allow investors to sell
off underperforming assets, without fear of triggering a tax bill, as
long as they reinvest the proceeds.